Government Considers Pension Tax Relief Options

Speculation is mounting that George Osborne may target the “better off” and reduce the amount of tax relief available on UK pension contributions, possibly from the date the Autumn Statement is made. An article on MoneyMarketing.co.uk provides more detail on this speculation.

Pension Tax

Currently, it is possible to make contributions of up to £50,000 per year and receive tax relief based on the marginal rate of tax paid. In other words, for a 50% taxpayer making the maximum allowable contributions, the Government and the individual taxpayer each contribute £25,000 per year to the pension pot.

It is also possible to “mop up” unused relief not used in the previous three years and make significant one-off tax-relievable contributions to either personal or company pension schemes.

Tax Relief

Pension tax relief does tend to come under the spotlight prior to Budget and Autumn Statement announcements and it is impossible to predict what will happen, but Liberal Democrat pressure on the Coalition Government to reduce tax relief on pension contributions appears to be mounting, and agitation from this quarter for a change in policy has increased since it was announced that the top rate of income tax will reduce to 45% from April 2013.

The Liberal Democrats are in favour of limiting tax relief on pension contributions to the basic rate of tax (20%) and whilst it is unlikely the Chancellor will do this, the Lib Dems are encouraging him to reduce the current Annual Allowance for contributions of £50,000 to £40,000 or even £30,000.

Tax Innovations

We are Chartered Tax Advisers and as such we cannot give financial advice, but if you would like to consider your options and possibly make increased pension contributions prior to any new rules being announced, please contact us. The Autumn Statement will be made on 05 December 2012. We can run projected tax calculations to help you work out the maximum contributions and tax relief available. If you need financial advice we can refer you to Independent Financial Advisers for specialist support in this area.

Contact us

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com.

On 29 October 2018, the Chancellor set out his budget to Parliament, stating that austerity is "finally coming to an end" as the economic outlook improves, and appearing to spread some of the potential benefits around. The budget offered little in the way of significant overhaul, largely focussing on adjustments to existing reliefs, but what were the actual changes to the UK tax environment?